President Donald Trump is preparing to roll out his most aggressive trade move yet as his long-promised “Liberation Day in America” arrives on Wednesday. After already imposing tariffs that have shaken global markets, Trump is now set to launch a sweeping round of reciprocal tariffs aimed at shrinking the United States’ record trade deficit.

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Since returning to the White House, Trump has slapped tariffs on goods from China, Mexico, and Canada, as well as on steel, aluminium, foreign vehicles, and auto parts. He has also threatened further duties on traditional allies like the European Union, going as far as to mention tariffs on European wine.

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But April 2 is seen as the real turning point in Trump’s “America First” trade agenda. That’s the day he will formally announce the reciprocal tariffs, targeting countries responsible for the bulk of the US’s $1.2 trillion trade deficit. The measures will officially take effect on Thursday.

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What are reciprocal tariffs?

Trump’s plan involves levying tariffs on imports from countries that currently impose tariffs on US goods. Back in February, he signed a memorandum instructing US trade officials to compile a country-by-country list of matching tariff rates.

Why is Trump doing this?

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According to Trump, the aim is to counter what he sees as unfair trade practices by foreign governments. By matching tariffs, the administration hopes to make importing into the US more costly, thereby encouraging companies to manufacture within the country.

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Trump has repeatedly argued that the US has allowed other nations to apply tariffs on its exports without any pushback. “We can’t do without it,” he said, insisting the tariffs are necessary for both national and international economic security.

Who are the 'Dirty 15'?

Treasury Secretary Scott Bessent recently explained that the tariffs would primarily target countries responsible for the largest share of the US trade deficit and those imposing the steepest tariffs on US exports.

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“There’s what we would call the ‘Dirty 15,’” Bessent said, noting these countries account for just 15% of US trading partners but represent a large portion of overall trade. While the official list has not been published, countries with significant trade imbalances include China, the EU, Mexico, Vietnam, Japan, and Canada, among others.

Is Trump narrowing the scope?

Bessent hinted that the administration might limit the scope of the tariffs, contrary to earlier sweeping proposals. For instance, while Trump has imposed new tariffs on the auto industry, other sectors—such as semiconductors and pharmaceuticals—have not yet been affected.

Asked about potential exemptions for life-saving medicines, Trump said, “We’ll be announcing it soon. But we have to bring pharmaceuticals, drugs and pharmaceuticals, back into our country.”

Despite weeks of building anticipation, Trump softened his rhetoric this week. “We’re going to make it very lenient,” he told reporters after signing the latest round of auto tariffs. “It’ll be, in many cases, less than the tariff that they’ve been charging us for decades.”

White House Press Secretary Karoline Leavitt echoed this, saying Trump believes the tariff levels “would be more conservative than many people are expecting.”

Will this hurt the US economy?

Economists have warned that extensive tariffs could harm an already fragile economy. Tariffs tend to raise prices for consumers and businesses, and retaliatory measures from other countries could dampen exports and shake investor confidence.

Stock markets have already shown signs of concern. On Friday, the Dow Jones Industrial Average fell by over 700 points, while the S&P 500 also took a hit. The losses came after inflation data showed a 2.8% rise in core prices compared to last year—higher than expected.

How are other nations responding?

Several countries have already hit back. Canada and China imposed retaliatory tariffs following earlier rounds, and the European Union is expected to respond soon.

Canadian Prime Minister Mike Carney criticised the US’s 25% auto tariffs, saying America is “no longer a reliable partner.” He added that Canada will seek deeper trade ties elsewhere and announce fresh countermeasures next week. “Nothing is off the table as we defend our workers and our country,” he said.

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Vehicles protected under the USMCA deal—negotiated during Trump’s first term—will not face full tariffs. However, parts sourced from outside North America will still be taxed.

Germany and France have also called for an EU-wide response.

What if countries retaliate?

Trump was clear that any retaliatory tariffs would be met with further US action. “That has to stop,” he said, referring to decades of what he sees as exploitation of US trade policy. He also claimed that some world leaders privately admitted to having taken advantage of the US—though he didn’t name names.

(With inputs from agencies)